Unravel Your Internal Mess

Telecom management processes are fragmented at most companies for historical reasons. Voice and data used to be entirely separate, both at the carriers and within enterprises, says Aberdeen's Basili. It used to be common to have a telecom department that handled phones, while IT handled the network. And billing was typically scattered regionally, because local phone service came from a local telco, while long distance was usually handled by a separate national company. That began to change with the rise of remote access connectivity, the Internet and VoIP, all of which disregard any difference between voice and data lines.

But to get a handle on telecom expenses—and ultimately on telecom strategy—an organization needs to assemble six areas (sourcing, procurement, invoice reconciliation, inventory management, analysis and reporting, and payment) and manage them together, Basili says.

"Everything in the telecom lifecycle is interrelated. If you focus on just one or two areas, you'll have leakage in the other areas that will more than eat up any savings," he says.

Without overall operational control and insight, functions within an organization can work at cross-purposes, notes Charlotte Yates, CEO of the telecom expense management consultancy Telwares. She recalls one client that renegotiated its telecom contracts and changed its supplier mix to reduce costs, unaware that IT was set-ting up a data center in another region. The contracts didn't account for the high-availability lines needed for that data center, which happened to be located in a region that the chosen carriers didn't serve. The result: The company lost all its negotiated savings by having to pay for expensive lines from another provider.

Any attempt at telecom expense management also needs to be in the context of telecom strategy, Basili notes. For example, if an organization expects to migrate significantly to VoIP, its carrier contracts need to avoid penalties for reducing the number of phone lines used in the future.

Most organizations negotiate based on their current mix, seeking economies through pooled minutes and volume discounts for maintaining a certain number of lines—and miss the fact that when those conditions change later, the carrier contracts impose penalties, like higher costs for excess usage, Basili says. "You really want strategic advice on how to structure your contracts to anticipate changes," says Ron Rose, CIO of Priceline.com, who uses TnT Expense Management to manage his telecom services and advise on contracts.

Bringing all these pieces together requires that a CIO navigate the various fiefdoms and start to orchestrate them, Basili says. Once CIOs can coordinate the various activities, they can begin to understand the actual needs, usage patterns and processes involved with telecom, he says. At that point, the CIO can bring in the tools or services needed to both manage telecom expenses and plan a strategy for telecom directions.